Sunday, March 21, 2004

Failed system still ripples

Lawsuit claims false billing for Ohio project

By James McNair
The Cincinnati Enquirer

As federal welfare reform funneled down to the states in the late 1990s, Hamilton County became ground zero for a project designed to streamline social service operations throughout Ohio.

A computer system, called the Integrated Client Management System, was proposed by the Ohio Department of Job and Family Services. It would allow state caseworkers to spend less time on data-entry tasks and more time with people in need of help. The federal government paid for it, and the state hired American Management Systems of Fairfax, Va., to build the system. Hamilton County's Department of Job and Family Services became a pilot user.

But Hamilton County never installed the system. Unhappy with its inability to communicate with older computers, the county dumped the Integrated Client system in November 2000. Two summers later, the state pulled the plug, too, leaving only 37 of Ohio's 88 counties participating and killing hopes of statewide implementation.

The 41/2-year project cost U.S. taxpayers $95 million and scarred the state's procurement record. Former Social Services Director Arnold Tompkins pleaded guilty in 2001 to ethics violations for steering large, no-bid contracts to American Management Systems and another company, Accenture, before joining them as a paid consultant. The current director, Thomas Hayes, used the scandal as a basis to re-establish competitive bidding.

But an epilogue is in the works. Four state employees allege in a lawsuit that American Management Systems failed to live up to its contractual obligations. They claim the company collected millions of taxpayer dollars through false billings.

And in February, legislation calling for an Ohio whistleblowers act was introduced by Attorney General Jim Petro and state Sen. David Goodman, R-Bexley. The bill would encourage citizens to report acts of fraud against the state. It also would require violators to pay three times the state's loss.

The lawsuit containing the allegations against American Management Systems was filed in May 2002, but was kept under seal in U.S. District Court in Cincinnati. It was unsealed in September 2003 after the U.S. government elected not to join the case as a plaintiff.

American Management Systems, a supplier of computer systems to local, state and federal governments, is asking that the suit be thrown out. Through its lawyer, Glenn Whitaker of Cincinnati, the company denies any wrongdoing.

Massive power needed

With a budget of $15.4 billion, the Department of Job and Family Services is Ohio's largest agency. It expects to dole out $8.8 billion this year in Medicaid payments. It will collect and disburse nearly $2 billion in child-support payments. Last year it paid out $1.4 billion in unemployment checks.

Processing applications, recording data and handling payments to several million Ohioans require massive computing power. The department uses four systems for family services benefits, including a circa-1980s mainframe system. If someone received food stamps, child support and Medicaid, that person's information is kept on separate systems. If someone on unemployment found a job, the computer handling food stamps would not automatically be notified.

That's what the Integrated Client Management System was supposed to fix. American Management Systems said the system would provide an "integrated, common front-end" to the older systems. It said once client data was entered, it would "populate" the other systems.

"The way the system was billed sounded great," said Nancy Allgauer, who managed the project for Hamilton County. "The various computers would talk to each other and update each other."

But the Ohio Department of Human Services - now known as the Department of Job and Family Services - was in disarray. Before Hayes joined the department in 2001, Ohio's handling of social service contracts had become a sore spot for the administration of Gov. Bob Taft.

Contracts totaling hundreds of millions of dollars were awarded without bids in some programs. Ohio Inspector General Tom Charles issued a 92-page report criticizing the department's no-bid contracts and Tompkins' relations with American Management and Accenture. When Hayes took over the department, two-thirds of its information technology staff worked for contractors.

"There was little control over the quality of the product or the employees showing up," he said.

Lawsuit allegations

According to the lawsuit brought by Randall Smith, Michel Wilcox, Alice DeWeese and Ronald Wilinski, American Management Systems worked on the Integrated Client project from December 1997 through June 2002. The state earmarked federal money for the system each year, the suit says, and the company received payments by submitting bills and timesheets.

But in 1999, the suit charges, the company realized it wasn't generating enough activity to tap the full amount set aside for the project. As a result, the lawsuit contends, American began doing other duties for the department, and billing it to the Integrated Client account. The suit does not specify who authorized the work.

"Ten to 15 percent of whatever was spent - was misspent" on work that was unrelated to the computer system, Smith alleges.

Smith said he and others complained about the company's billing practices in 1999. Having little faith in a politicized system, Smith said he did not take his concerns outside the agency. "I kept it within my chain of command," he said. "We voiced our concerns multiple times verbally, and I had done it I believe three times in writing."

Based on the $95 million paid to American Management, the lawsuit suggests up to $14 million was falsely billed.

The lawsuit also accuses American Management of assigning unqualified employees to the project.

In one instance, the suit charges, a company employee, booked as a $110-an-hour senior business analyst, actually served as an assistant to a state manager not involved with the computer system.

A winning lawsuit could mean a fat payoff for Smith and the others. Under the U.S. False Claims Act, better known as the whistleblower law, American Management Systems faces trebled damages and fines of up to $11,000 for each proven false claim. The Smith group's bounty would be 30 percent of any judgment or settlement.

That, the company suggests, is the real reason for the suit. In a dismissal motion filed in January, American Management says the plaintiffs are merely claiming the inspector general's findings as their own. Consequently, the company argues, Smith and the others are not "original sources" of the information and thus have no legitimate standing as whistleblowers.

Smith disputes the contention, saying he and the other state employees were firsthand observers of alleged contract improprieties.

American Management Systems remains in good standing as a contractor with the Ohio Department of Job and Family Services, and no state or federal agency has charged the company in connection with the Ohio computer system. It is in the second year of a three-year contract for a computer system that determines eligibility for welfare programs and is a subcontractor for a system that tracks child-support payments.

Meanwhile, Hayes said the Integrated Client system will remain in "maintenance" mode in the 37 counties using it. He said the state will not expand the program. "It was not going to achieve the end that was originally envisioned," Hayes said. "It was building on a level of technology that has long since passed."



Region, CEOs team up to play growth game
CincyTech nurturing businesses
Pairing turned profitable
Failed system still ripples
Huge firm not immune to disputes
Dreams contained no more
Eat your veggies, and focus
Look Who's Talking: Sandra A. Butler
Opportunity session for Kroger project
Meetings this week
Rules vary on entertaining clients